Pensions bodies today urged the Governmentto give them more breathing space to cope with the "turmoil" causedby quantitative easing (QE).

The National Association of Pension Funds
(NAPF) said funds should be able to add a "small margin" onto their
discount rates, which underpin the way they report their financial health.

Discount rates are worked out to make sure
pensions are in good shape and calculate how they will be funded, which is
something the Pensions Regulator checks.

But many funds base these rates on gilt
yields, which have been "heavily skewed" by QE and make it much more
expensive for employers to run final salary pension schemes, the NAPF said.

It said that with a further round of QE
expected in the coming months, pension funds could be plunged even deeper into
the red and firms will be forced to divert cash into plugging more pension
holes.

The NAPF argued that changing discount
rates could slash pension deficits by more than £20 billion and would mean firms
could instead use the money for investment and job creation.

It called for Chancellor George Osborne to
acknowledge the problem in his Autumn Statement by signalling that a temporary
uplift to discount rates based on gilt yields is acceptable.

NAPF chairman Mark Hyde Harrison was
making the call in his opening speech to the NAPF annual conference in
Liverpool.

He said: "The UK is well behind the
curve on this. Other countries have given pension funds breathing space to
adapt to their low gilt environments. It's time we caught up."

The Bank of England's policy of
quantitative easing (QE) has been blamed by pensions campaigners for the recent
increases in deficits and for making pensioners worse off.

When they retire, workers use their
pension pot to buy an annuity from an insurer, a decision which sets the size
of their pension for life.

Annuity rates are linked to the yields on
government bonds, called gilts, which have been dramatically reduced by QE.

Even before additional QE was announced in
March, the NAPF estimated that the policy had increased pension fund deficits
by £90 billion.

It said that yawning deficits also harm
firms by spooking investors and a business that is struggling to fund a pension
is also more likely to close the scheme altogether.

The call also follows the Government's
landmark scheme launched earlier this month to automatically enrol up to 10
million people into pension schemes in the coming years.

Mr Hyde Harrison said: "Discount
rates are being calculated on artificially depressed gilt yields, and those
false foundations are putting a lot of stress on businesses trying to keep a
final salary pension going.

"We cannot predict the next 40 to 50
years on the basis of gilt prices that have been in turmoil for the past three.

"The authorities need to say to those
running pension schemes that it's OK for a higher rate to be used, at least
until things return to some normality."

A spokesman for the Pensions Regulator
said: "Employers don't necessarily need to put in more money as a result of
higher deficits.

"Trustees can welcome investment in
the sponsoring employer where this strengthens the employer's ability to
support the scheme in the long-term.

"We are working proactively with
schemes and sponsors to find a way through the most difficult cases.

"No valuation measure is an entirely
accurate guide to the future, but our view is that adjusting discount rates in
isolation risks simply picking the answer you want, and ignoring the reality of
the situation."